Coles, which sells alcohol through its Liquorland, Vintage Cellars, First Choice and Liquor Market outlets, is playing catch-up. The retailer wants to grow its private label portfolio from the current 10 to 20 per cent of brands currently stocked, its head of wine sourcing Ed Ashley told Fairfax Media.

Woolworths chairman Gordon Cairns yesterday admitted the retailer had initially failed to take the discount chain seriously when it arrived in Australia 15 years ago.

“We were somewhat lackadaisical in responding to the threat from Aldi — that is no longer the case,” Mr Cairns said during the group’s annual general meeting.

But he said Woolies’ own-brand products now matched Aldi’s prices, and that it had regained its lead in fresh food after temporarily losing its mantle to Coles.

Alcohol was named as one of the retailer’s top five priorities for its turnaround, with its $484-million-a-year Endeavour Drinks Group — which includes Dan Murphy’s and BWS — one of the only segments to grow its earnings in the last financial year.

Chief executive Brad Banducci echoed Mr Cairns’ view of Aldi after shareholders expressed concern about Woolworths having not kept up with the competition.

“We didn’t treat Aldi with the respect they deserved as a very successful global retailer,” Mr Banducci said. “We have done a lot of work on our own brands.”

He said the group initially matched its entry-level Home Brand product prices with Aldi’s prices but “it didn’t move the dial” until Woolworths began phasing out Home Brand and redesigning and expanding its Essentials brand last year.

How to Gift Wine Like an Expert4:30

Want to gift wine like a master this holiday season? Charles Curtis, master of wine and former head of wine for Christie's, joins Lunch Break with three fine wines at three affordable price points for everyone on your list. Photo: Getty Images.